Burberry
In 2023, Burberry made a record £634 million profit. Two years later, 96% of it was gone. Burberry: "We took pricing too high across the board."
ALL BREAKDOWNSTHE BREAKDOWNFEATURE
10/8/20266 min read
In 2023, Burberry made a record £634 million profit. Two years later, 96% of it was gone.
Burberry: "We took pricing too high across the board."
The mistake was made in the middle of that record year.
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THE SETUP
In a Burberry store today, the classic trench coat will cost you around £1,900. It's made in England from gabardine, the fabric Thomas Burberry invented in 1879. It's the thing most people picture when they hear the name, it remains a popular purchase on the high street.
In early 2024, the bag Burberry wanted you to buy cost £2,890. The medium Knight bag was the centrepiece of the brand's new look. It was a handbag priced nearly £1,000 above the famous Burberry coat.
In November 2022, new chief executive Jonathan Akeroyd told investors Burberry would grow from £2.8bn in sales to £4bn in the medium term, then £5bn. The biggest jumps would come from roughly doubling leather goods and shoes.
He had the designer to do it. Daniel Lee had just spent three years at Bottega Veneta, where his Pouch and Cassette bags became the ones everyone in fashion wanted.
Six months later Burberry reported a record £634m in operating profit.
Lee's first products reached the shops in September 2023. Over the next six months comparable store sales fell 8%. The year after that they fell 12%. By FY25 profit was down to £26m, Akeroyd had gone and Burberry had dropped out of the FTSE 100.
Burberry bet its future on the bag. Customers kept buying the coat. Over the next two years, that decision cost the company most of its profit.
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THE PLAYBOOK
1. Mistake a good year for permission
So why did Burberry think it could charge Louis Vuitton money for a bag? It never published any customer research saying it could.
What it had was evidence that looked convincing at the time.
The numbers were strong. Leather goods sales grew 12% in FY23, helped by the Lola, a bag designed before Lee arrived.
And Lee was the designer everyone wanted. In 2019 he won four awards at the British Fashion Awards, mostly on the back of his Bottega bags.
Around it, the whole industry was pushing prices up. After Covid, Chanel and Louis Vuitton raised prices again and again and customers kept paying. Investors wanted Burberry to catch up. "People are a little bit fatigued about waiting for us to pop as a brand," Akeroyd told Business of Fashion.
When the plan was announced, Barclays called leather goods a crowded category and said Burberry still needed to earn more credibility in it.
A Lola selling well proved some customers would buy a Burberry bag. Whether they'd pay far more for one was a separate question and Burberry didn’t tested it first. Joshua Schulman, who took over as chief executive in 2024, admitted Burberry had stretched prices "on absolutely every product."
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Takeaway: a good year tells you customers are happy with today's prices. It won't tell you where their limit is. You only find that out by testing it. Put the price up on a handful of products, watch what happens and then decide.
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2. Put the price up and wait
Customers answered the way customers usually do. They stopped buying.
We don't know where the customers went. Nothing public shows them switching to Louis Vuitton or waiting for the sales. Burberry's figures show and more worrying pattern. People were still walking into the shops. They looked around and left without buying. By late 2023 Akeroyd was telling analysts Burberry had a "conversion problem."
Plenty of people through the door, not enough spending money. Meanwhile, stock that should have sold was piling up.
Here's roughly where the £608m went. Revenue fell from £3.1bn in FY23 to £2.5bn in FY25. Burberry keeps about 70p of gross profit from every pound it sells, so that fall alone took out around £440m. The cost of running 420 stores barely moved. Rent and staff don't shrink because fewer people buy.
Then there was the stock nobody wanted. Burberry had to sell it off cheaply to clear the shelves. On every £100 of sales in FY25, it kept about £5 less than the year before. That's roughly another £130m gone.
Those two together explains most of the collapse.
Was it all the handbag? No.
Chinese shoppers cut back hard and sales in mainland China fell 15% in FY25. Every luxury brand felt that.
Burberry also sold far less through department stores and other retailers, down by more than a third. Part of that was deliberate, pulling out of stockists that discounted the brand.
Moncler had the same Chinese customers and the same bad years and still sold more in 2024 and 2025. So, a tough market is part of Burberry's story. It still leaves the question. Why did Burberry fall so much harder than the brand selling expensive jackets a few doors down?
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Takeaway: when you put prices up too far, customers rarely complain. They vote with their feet (and wallets).
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3. Fight where you're already the favourite
Selling a handbag resulted in Burberry going up against Chanel, Louis Vuitton and Hermès. They've spent decades and fortunes making their bags the default choice. A customer walking in with £3,000 to spend on a bag already has a favourite and it usually isn't the newcomer.
Nobody competes with Burberry for the trench coat. The coat got its name in the First World War, when British officers wore them in the trenches and Burberry was one of the firms that made them.
That's where Burberry's advantage sat and it was smaller than it looked. In 2024 a Morningstar analyst pointed out that outerwear and scarves, the products people related to Burberry, made up only 40% to 50% of sales.
The £4bn plan would have made that worse. Bags and shoes were meant to double, while coats only grew by half. So even if everything had gone to plan, the iconic Burberry products would have ended up a smaller part of the business.
Moncler went the other way. It sells very expensive puffer jackets and when it wanted to grow, it sold more kinds of puffer jacket, from ski wear to designer collaborations. It never had to win a customer off Chanel. Its margin held between 29% and 30% for three straight years while the market slowed.
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Takeaway: before you move into a new product, ask who customers think of first. If it isn't you, you're paying to change their minds and that takes years. The cheaper growth is usually where you're already winning.
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ONE MORE THING
Burberry replaced Akeroyd with someone who had spent years successfully selling handbags. Joshua Schulman ran Coach from 2017 to 2020, the years it launched the Tabby, then he ran Michael Kors.
In November 2024 he told investors: "We took pricing too high across the board." He aimed handbags below €2,000, with a sweet spot around €1,600 and left coat prices alone. More than 200 scarf bars went into stores, selling silk scarves from $275 and cashmere up to around $1,000. For a lot of younger shoppers, a scarf is now the first Burberry they own.
The shares jumped 20% in a day. Burberry was back in the FTSE 100 within a year.
So has Schulman fixed demand? Not yet.
Profit rose from £26m to £160m. Sales and costs were flat too. Burberry cut around 1,700 jobs and saved £80m, then put that money back into the brand.
Nearly all of the £134m jump came from gross margin. It rose to 67.9%, mainly because Burberry wasn't dumping unwanted stock like it had the year before. On £2.4bn of sales, that's about £130m.
In other words, Burberry stopped losing money on stock it couldn't sell. It hasn't yet found enough customers to replace the ones who left. Revenue is still around £670m below FY23.
There are early signs. Sales grew 5% to March 26, with China and the Americas both up 10%. Outerwear and scarves grew by double digits in the second half. The average price of what people bought dipped slightly, which is a result of cheaper handbags.
Burberry has worked out what its customers want. The next test is whether the person who walks in for a $275 scarf comes back for the trench coat.
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THE PAPER TRAIL
Fashionista reviews Daniel Lee’s Burberry debut, February 2023
4 minute read
Captures the optimism surrounding Burberry before the financial collapse.
https://fashionista.com/2023/02/burberry-fall-2023-review
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“Burberry got too fancy”, Joshua Schulman profile, July 2025
9 minute read
The best behind-the-scenes account of the reversal. Schulman describes gathering 200 designers, merchandisers, product developers and marketers, diagnosing Burberry’s obsession with the “opinionated customer” and rebuilding the offer around coats, scarves and recognisable checks.
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Olivia Colman’s “Postcards from London” campaign, October 2025
4 short films
The strategy made visible. Olivia Colman plays a collection of London characters.
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